NICOSIA (MNI) – The Bank of Cyprus Tuesday registered its
disagreement with the decision of Fitch Ratings, announced earlier in
the day, to downgrade long-term Cyprus sovereign debt to A- from AA-.

Fitch stated as its principal reason, “the severity of the crisis
in neighbouring Greece and the risk this poses for the Cypriot banking
system and consequently the public finances of Cyprus.” It said the
outlook for Cyprus remained negative, meaning further downgrades are

The Bank of Cyprus said it “does not agree with Fitch’s analysis.
However, it takes all additional measures to safeguard the banking
system since it considers that each state must act pre-emptively.”

Noting Fitch’s reference to the severity of the Greek crisis in its
decision on Cyprus, the central bank asserted that even the rating
agency “is aware that the Cypriot banking system is capable of
overcoming any possibility of serious Greek debt restructuring.”

The comment is an interesting one, since the official position of
the European Central Bank is that no restructuring or reprofiling of
Greek debt is possible.

The central bank said it “implements a strict supervision program
and demands, among other things, high liquidity levels and surplus
capital for risk management.” It added: “Our banks remain profitable and
have further strengthened their capital base the past year, exceeding
the Basel III requirements, which are not obligatory before 2019.”

The Bank of Cyprus said the country must have “healthy public
finances” in order to address the concerns of foreign investors. “We
must reverse the negative course of the deficit and public debt, so it
can correspond to the dynamic of a small country with a large financial
sector,” the bank said.

–Angelika Papamiltiadou;

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